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How Much to Save to Retire: Charted
I ran the numbers of exactly how much money you need to save to retire within different time horizons.
Before diving into the chart, I made three assumptions to calculate how much to save for retirement. First, I assumed a 10% annual return on your investments. If that seems high, consider that the historical stock market return is around 10.5% per year for the S&P 500. You can also earn higher cash-on-cash returns on rental properties, using leverage in real estate investments.
The second assumption was a 4% withdrawal rate in retirement (the 4% Rule). But with rental properties, you can bend that rule using tactics like the BRRRR method.
Finally, I assumed that you maintain the same living expenses in retirement that you have while working. So, if you earn $5,000 in after-tax income, and have a savings rate of 20%, that assumes that you continue spending $4,000 a month in retirement ($48,000 per year, which would require a $1.2 million nest egg if you follow the 4% rule of thumb).
Here’s the savings rate you need to retire at different time horizons:
| Savings Rate | Time (in Years) |
| 5% | 40.8 |
| 10% | 33.2 |
| 15% | 28.6 |
| 20% | 25.2 |
| 25% | 22.5 |
| 30% | 20.2 |
| 40% | 16.4 |
| 50% | 13.2 |
| 60% | 10.3 |
| 70% | 7.7 |
| 80% | 5.1 |
To illustrate those numbers with an example, say your after-tax annual income is $100,000 ($8,333.33/month). Your monthly savings, target monthly spending, and target nest egg would look like this for different savings rates:
| Savings Rate | Monthly Savings | Monthly Living Expenses | Target Annual Income | Target Nest Egg | Number of Years to Reach | ||||
|---|---|---|---|---|---|---|---|---|---|
| 5% | $416.67 | $7,916.67 | $95,000.00 | $2,375,000.00 | 40.8 | ||||
| 10% | $833.33 | $7,500.00 | $90,000.00 | $2,250,000.00 | 33.2 | ||||
| 15% | $1,250.00 | $7,083.33 | $85,000.00 | $2,125,000.00 | 28.6 | ||||
| 20% | $1,666.67 | $6,666.67 | $80,000.00 | $2,000,000.00 | 25.2 | ||||
| 25% | $2,083.33 | $6,250.00 | $75,000.00 | $1,875,000.00 | 22.5 | ||||
| 30% | $2,500.00 | $5,833.33 | $70,000.00 | $1,750,000.00 | 20.2 | ||||
| 40% | $3,333.33 | $5,000.00 | $60,000.00 | $1,500,000.00 | 16.4 | ||||
| 50% | $4,166.67 | $4,166.67 | $50,000.00 | $1,250,000.00 | 13.2 | ||||
| 60% | $5,000.00 | $3,333.33 | $40,000.00 | $1,000,000.00 | 10.3 | ||||
| 70% | $5,833.33 | $2,500.00 | $30,000.00 | $750,000.00 | 7.7 | ||||
| 80% | $6,666.67 | $1,666.67 | $20,000.00 | $500,000.00 | 5.1 |
Note that these figures don’t account for income taxes in retirement. But you do have plenty of options to reduce or avoid taxes in retirement, from Roth IRAs to rental property tax deductions to ways to avoid capital gains tax on real estate.
The above numbers also don’t account for Social Security benefits, which you may well receive. See our financial independence/early retirement calculator to include these and other sources of income such as rental properties.
These tables could use a bit more explanation though, so here are a few thoughts on reaching financial independence and early retirement (FIRE) on a fast timeline.
How Much to Save to Retire in 5 Years
Even with an 80% savings rate, it would still take just over five years to reach financial independence — at least with the assumptions built into this exercise.
In the example above, where you take home $8,333 per month, that means living on $1,667 per month. Not just now, but also in retirement.
That’s a tall order in today’s world.
If you want to retire in five years, you’re going to need to bend some rules. Plan on either earning a higher rate of return than the 10% I used to run these numbers or bend the 4% Rule by investing in real estate. For example, if you can reuse the same down payment over and over by refinancing rental properties with the BRRRR method, you can theoretically reach financial freedom with a single down payment.
You can further bend the rules by continuing to work post-retirement, doing something fun or meaningful (ideally both). I like to imagine myself working part-time at a winery to bring in extra money in retirement, for example.
How Much to Save for Retirement in 10 Years
With a 60% savings rate, you can retire in ten years.
Continuing the example above, that would mean living on $3,333 per month, and investing the other $5,000 you earn each month. Millions of Americans live on a similar budget, but don’t expect to live in the lap of luxury.
Again, look for ways to bend the rules with higher investment returns, higher withdrawal rates, more leverage, or continuing to work part- or full-time doing something fun for post-retirement income. Take advantage of employer matching contributions to tax-advantaged retirement accounts. It’s effectively free money, helping you boost your savings rate and hit your savings goals faster.
How Much to Save to Retire in 15 Years
If you’re willing to save around 45% of your income, you can reach financial independence and retire in 15 years.
In the example above, that means saving $3,750 each month, and living on the other $4,583. We’re entering a more practical realm for the average person interested in financial independence and early retirement.
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